It's an elusive magic formula that makes online advertising pay.
Companies are pushing out the boundaries, but with ethically
dubious results
The struggle to survive in online advertising has forced some
companies to adopt solutions so innovative that they verge on the
ethically dubious. Just recently, Gator.com launched its
OfferCompanion product, which displays pop-up ads that obscure
pre-existing banners on a website. Needless to say, this is done
without the consent of the site's publishers and advertisers,
prompting the US Interactive Advertising Bureau (the IAB) to
suggest that Gator.com presents a false and misleading business
relationship between the sites and the substituted
advertisers.
Although unable to sue Gator itself, the IAB is petitioning the
Federal Trade Commission to take the matter further.
The legal issues raised by Gator's practices are manifold - partly
contractual, partly privacy-related (Gator is able to monitor
surfing habits and target its advertising with disturbing
accuracy). Such complex problems are likely to become an issue in
the UK in the foreseeable future - yet right now, most
advertising-related issues are simpler and pertain to the nature of
the ads themselves: are they honest and decent?
In late August, Emap-owned MaxPower was forced to apologise to
recipients of a joke-email, after the UK's Advertising Standards
Authority (the ASA) upheld the complaint that the advert caused
undue fear and distress. The case is typical of the hundreds of
Internet-related cases that now go before the ASA each year, the
figure having risen from eight in 1996 to 300 in 2000 a figure that
is growing every month.
Although the ASA's remit with respect to the Internet used to be
somewhat vague, this has since been rectified so that online ads
(banner and pop-up), ads in commercial emails and sales promos all
fall within the ASA's authority. A remit that excludes all other
types of advertising that appears on the Internet is perhaps a
reflection of the ASA's limited capacity to deal with cases.
So just how effective a body is the ASA? Well since the ASA's
system effectively relies on media owners to enforce its decisions,
and since Internet advertising does not have an equivalent media
owner, one can argue that decisions are not worth much, as they can
effectively be ignored by advertisers. Regulation is scant: French
Connection's notorious Kinky Bugger campaign, for example, couldn't
be broadcast on TV but could be seen on its website.
Yet despite these concerns, no business wants to court bad
publicity and, since the basic premise to the ASA Sales and
Promotion code (found at www.asa.org.uk) constitutes good business
practice, it is wise to adhere to it. What's more, most website
owners will require a contractual commitment to this effect - this
being but one of a number of fundamental factors in an advertising
contract.
So what else should be born in mind for such a contract?
Here are a few key legal pointers:
- With more sophisticated ads that involve moving images, is it
necessary to obtain user rights or consent?
- Will you want to re-use the ad in any other medium? If so, the
regulator for that content should be considered. For interactive
TV, for example, the iTC code would be relevant.
- Will the site commit to display the ad 24x7? If this does not
happen, will you be offered a rebate? If the link is down on the
site, then consider setting a time limit within which this problem
must be solved.
- Consider advert content: will consumers click through to part
of the site where you are going to be selling? If so, the Distance
Selling Regulations might apply.
When the bubble bursts
As reported in an earlier EBR,
the recent downturn lays the ground open for blame-litigation
against those who might be thought responsible for inflated share
prices. This has now commenced in the US, with the shareholders of
Webvan, a company that filed for bankruptcy, having filed a suit
against the executives and underwriters - and several of the
investment banks.
UK directors should remember that they are under an obligation to
minimise potential loss to the company's creditors and meet the
standard of a reasonably diligent person. Any court examining the
matter will look not just at what a director knows, but at what he
or she ought to have known. Young inexperienced entrepreneurs
should take note!
Further information
- Further information on all of the above is available at
ebldirect.com, an online service that offers legal assistance to
professionals working in e-business. As well as providing analysis
across the spectrum of e-commerce legal issues, it provides case
reviews and legislation.
- Please call 0845 608 1188 for details or sign up for a free
trial at
www.ebldirect.com